|Thursday, March 5, 2009
Nancy Condon (202) 728-8379
Herb Perone (202) 728-8464
Washington, DC — The Financial Industry Regulatory Authority (FINRA) announced today that it has established a new Office of the Whistleblower to expedite the review of high-risk tips by FINRA senior staff and ensure a rapid response for tips believed to have merit.
"One of the important lessons learned from the recent scandals is the need for regulators to recognize and react to regulatory intelligence offered by whistleblowers," said Stephen Luparello, FINRA's Interim CEO. "We want to encourage individuals with evidence of, or material information about, potentially illegal or unethical activity to come forward. This new initiative will ensure that individuals with significant information will reach senior staff, who can quickly assess the level of risk involved and make sure that each tip is properly evaluated. Those tips warranting additional review and investigation will be subject to an expedited regulatory response."
To facilitate the submission of whistleblower information, FINRA's new Office of the Whistleblower has established a toll free phone number — 1-866-96-FINRA (1-866-963-4672) — and has posted a dedicated web page — www.finra.org/whistleblower, where individuals may email their information to FINRA.
Any whistleblower tips that fall outside FINRA's jurisdictional reach will be referred to the appropriate regulatory or law enforcement agencies.
The new office will be overseen by FINRA Senior Vice President Cameron Funkhouser.
FINRA's new whistleblower initiative will not replace the agency's longstanding processes for handling thousands of routine regulatory tips and customer complaints each year. FINRA typically receives between 4,500 and 6,000 formal investor complaints annually, which are vetted by FINRA's Front End Cause Unit. Complaints that appear to have merit are forwarded to the appropriate FINRA District Office or Department - such as Enforcement, Member Regulation or Market Regulation - for further investigation.
Some of FINRA's most significant enforcement actions have resulted from investor complaints or anonymous or insider tips. They include FINRA's 2007 action against Citigroup Global Markets, ordering the firm to pay a $3 million fine and $12.2 million in restitution to customers to settle charges of misleading Bell South employees in North and South Carolina at early retirement seminars; FINRA's 2006 fine of $5 million against Merrill Lynch to resolve charges related to supervisory violations at its customer Call Center; FINRA's 2005 landmark action against the Kansas firm Waddell & Reed, Inc., in which the firm was fined $5 million and ordered to pay $11 million in restitution to customers to resolve charges related to variable annuity switching; and, FINRA's 2002 action against Credit Suisse First Boston to resolve charges of siphoning tens of millions of dollars of customers' profits in exchange for "hot" IPO shares, which resulted in a $50 million fine imposed by FINRA and an additional $50 million fine imposed by the Securities and Exchange Commission.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2008, members of the public used this service to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and firms.
For more information, please visit our Web site at www.finra.org.